Why Hilltop Holdings Stock Slumped Today

Source The Motley Fool

Key Points

  • It fell notably short of analyst estimates for both revenue and net income.

  • At least it maintained its dividend policy, and continues to actively buy back its own shares.

  • Motley Fool Issues Rare "Total Conviction" Buy Alert ›

Hilltop Holdings (NYSE:HTH) investors had a Thursday to forget, as their stock took a bit of a dive that trading session. Hilltop released its latest set of quarterly figures after market close the day before, and these weren't exactly greeted warmly by Mr. Market when trading began the next morning. The shares closed down nearly 3% on Thursday.

A downhill quarter

For the period, Hilltop's total revenue was slightly under $310 million, down 6% year over year. Net income under generally accepted accounting principles (GAAP) declined more precipitously, at a 46% clip to $24.9 million, or $0.44 per share.

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Both results fell well short of the consensus analyst estimates. Collectively, pundits tracking Hilltop stock expected the company to earn just under $320 million and GAAP earnings per share (EPS) of $0.64.

In its earnings release, Hilltop characterized the quarter as "volatile" and said that the Federal Reserve's recent interest rate hike and the broader interest rate environment affected its performance.

On a brighter note, the company signaled confidence by declaring a fresh quarterly dividend matching its predecessor, at $0.22 per share. It also revealed that it spent $20 million on stock repurchases during the quarter, under a program that has roughly $86 million left under authorization until the end of the year for that purpose.

Room for improvement

It's good that Hilltop pays a relatively high-yielding dividend (of nearly 2.2%) and is an active buyer of its own equity, because the quarter wasn't an impressive one. If I were a shareholder, I'd be particularly concerned with the clear weakness in the company's HilltopSecurities broker-dealer business and its PrimeLending mortgage unit. And I'd look elsewhere for a higher-potential financial stock.

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